On the 29th of October 2018, we asked our followers on Instagram (@askamplify) to put forward their questions on trading psychology to Amplify’s Managing Director Will de Lucy, here’s what he had to say…

What do you find has the bigger impact on your PnL, trading after a good or bad day?

Bad day. A good day can lead to overconfidence on the next day which can impact performance for sure.  However, a bad day can lead to a series of poor performances which can then lead to a spiral of poor decisions, lack of confidence, and more bad days.

How long does it take to train yourself to trade objectively?

I think it depends from your starting point. When I started trading it was at a time in my life (22) when I did not tend to over-think decisions. A naturally positive attitude meant I could take knocks without taking it personally, or without having the need to be right.  If you have become used to having a view in the market, and need that view to be correct, the ‘objectiveness’ of trading can take longer to master. It is absolutely possible to achieve however.

How are traders feeling after S&P correction?

Activists like myself want to see a continuation of this volatility. Traders with longer term positions would want to see this as a test only, before the long term rally continues.

What book are you currently reading?

Shoe Dog by Phil Knight. The founder of Nike talks about his challenges of building his business. Also, it’s an appropriate read given my next marathon will be in Athens in just two weeks!

Over trading kills me, what is your advice?

You have already done the most important thing. You have recognised your weakness. Now you need to ensure you can make it better. One truth is clear for the over-trader. The fear of losing money is not great enough to change their behaviour. A much greater punishment is not being able to trade. Baring this in mind I would advise the following to allow you to habitually trade less:

  1. Measure how many times you trade every day and at the end of the week review and see how many of those trades were well thought out, and contributed to your overall goal of profitability.
  2. Based on this decide how many times you will now allow yourself to trade on any given day (for the sake of argument say 5).
  3. Make sure you now only trade those 5 times in one day. Never trade more. This at first seem a very un-elegant way to go about things, but it for a longer term good. You see when you have hit your limit of 5 trades, it may be that you then have to sit and watch an excellent opportunity pass, which would have made you money. However, the pain and frustration this causes should be a good incentive now to make sure that the next day you have not used up all your bullets, and such an opportunity could have been taken. Over time, this will begin to change your behaviour, and give each trade more respect.
  4. After 2-3 weeks, giving each trade more consideration will start to change your habit, it will feel normal to do so rather than forced.
  5. Now you have this cracked, it’s time to work on the next area of performance!

How can you identify a trading strategy that gels with your psychology/risk tolerance?

The key here is self-awareness. Know who you are and what you are good at. When you trade in sync with your skill-set trading feels effortless, and almost enjoyable. If you are good at break-our trades and momentum moves don’t trade slow products in slow markets. If you do not perform well in volatility then stay away from data releases.

 

Anthony Cheung
Anthony is a leading market commentator with over a decade of experience accumulated as Head of Market Analysis at a leading news and analysis organisation, and now a Director of Amplify Trading.